Forex reserves fall to a new low

yinka ogunlami

December 4, 2015 3:17 PM

The Nigeria’s forex reserves hit below $30 billion for the first time since 13 July 2015.

An aerial view shows the central business district in Nigeria's commercial capital of Lagos

The Nigeria’s forex reserves hit below $30 billion for the first time since 13 July 2015. Central Bank of Nigeria (CBN) is highly concerned about this development.

An aerial view shows the central business district in Nigeria's commercial capital of Lagos (image from Business report website)

Gross reserves slipped to $29.92 billion on November 30, the first time they have fallen below $30 billionsince July 13. The foreign exchange reserves fell to $30.04 billion by November 26 from $30.10 billion the month before According to figures released by the CBN, the reserves were down 18.6 percent on the year from $36.9 billion in the same period in 2014.

They have fallen by 20 per cent since the end of June 2014, when Brent crude prices began a more than 60 per cent plunge, hammering Nigerian finances. The CBN said the continuous pressure on the foreign exchange market was due to the rise in the internal demand for dollars.

According to the bank, the price of crude oil at the international market stood at 44.27 dollar per barrel as at November 30, putting more pressure on the Central Bank of Nigeria's (CBN) bid to defend the naira and avoid a devaluation. CBN had already implemented restrictions on the import of non-essential products.

The apex bank’s decision to defend the naira through selling dollar to the parallel market on a weekly basis made the reserves fall to $30.69 billion in September – a short fall from $31.63 billion on the figures from August – and 22.42 percent less than it was in September 2014. In October however, the CBN shifted the naira peg from 197.96 to 197, following a fall of over a billion dollars in reserves within the month.

“With the oil price remaining low, the pressure isn’t dissipating,” said Ikechukwu Iheanacho, who manages N40 billion ($202 million) of stocks and bonds for Lagos-based Chapel Hill Denham Securities.

Meanwhile, the Debt Management Office (DMO) has disclosed plan to raise N50 billion ($251.26 million) in local currency denominated bonds maturing in February 2020 and March 2024.

Emerging-market investors including Aberdeen Asset Management Plc, AllianceBernstein and Investec Asset Management have sold Nigerian bonds and stocks this year to avoid what they see as an inevitable devaluation.

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